Related papers: Optimal taxation and the Domar-Musgrave effect

We introduce a highly stylized, yet non trivial model of the economy, with a public and private sector coupled through a wealth tax and a redistribution policy. The model can be fully solved analytically, and allows one to address the…

We consider the problem of optimal consumption from labor income and investment in a general incomplete semimartingale market. The economic agent cannot borrow against future income, so the total wealth is required to be positive at (all or…

Taking environmental tax rate as given, is there an optimal allocation of tax revenues to benefit economic variables? This paper analyzes this issue in an overlapping-generations model with the pollution-related health damage. It finds the…

This paper develops a new model of business cycles. The model is economical in that it is solved with an aggregate demand-aggregate supply diagram, and the effects of shocks and policies are obtained by comparative statics. The model builds…

We demonstrate by mathematical analysis and systematic computer simulations that redistribution can lead to sustainable growth in a society. The human capital dynamics of each agent is described by a stochastic multiplicative process which,…

We consider the problem of repeatedly choosing policies to maximize social welfare. Welfare is a weighted sum of private utility and public revenue. Earlier outcomes inform later policies. Utility is not observed, but indirectly inferred.…

This paper analyzes whether a minimum wage should be used for redistribution on top of taxes and transfers. I characterize optimal redistribution for a government with three policy instruments -- labor income taxes and transfers, corporate…

The optimal taxation of assets requires attention to two concerns: 1) the elasticity of the supply of assets and 2) the impact of taxing assets on distributional objectives. The most efficient way to attend to these two concerns is to tax…

In the so-called ``fair'' models of peer-to-peer wealth exchanges, economic inequality tends to reach its maximum value asymptotically. This global trend is evident as the richest continuously accumulate a larger share of wealth at the…

International taxation rules are outdated, allowing multinationals to shift profits to tax havens. This paper examines how tax reforms affect profit shifting and cross-country welfare. We propose a model that separates real economic profits…

In this paper we deal with the optimal bankruptcy problem for an agent who can optimally allocate her consumption rate, the amount of capital invested in the risky asset as well as her leisure time. In our framework, the agent is endowed by…

We study a system of $N$ agents, whose wealth grows linearly, under the effect of stochastic resetting and interacting via a tax-like dynamics -- all agents donate a part of their wealth, which is, in turn, redistributed equally among all…

We model the role of an online platform disrupting a market with unit-demand buyers and unit-supply sellers. Each seller can transact with a subset of the buyers whom she already knows, as well as with any additional buyers to whom she is…

This paper develops a framework for assessing the welfare effects of labor income tax changes on married couples. I build a static model of couples' labor supply that features both intensive and extensive margins and derive a tractable…

The Nobel-price winning Mirrlees' theory of optimal taxation inspired a long sequence of research on its refinement and enhancement. However, an issue of concern has been always the fact that, as was shown in many publications, the optimal…

We study the power of item-pricing as a tool for approximately optimizing social welfare in a combinatorial market. We consider markets with $m$ indivisible items and $n$ buyers. The goal is to set prices to the items so that, when agents…

We characterize optimal policy in a multidimensional nonlinear taxation model with bunching. We develop an empirically relevant model with cognitive and manual skills, firm heterogeneity, and labor market sorting. We first derive two…

We propose martingale consumption as a natural, desirable consumption pattern for any given (proportional) investment strategy. The idea is to always adjust current consumption so as to achieve level expected future consumption under the…

We consider a risk-sensitive optimization of consumption-utility on infinite time horizon where the one-period investment gain depends on an underlying economic state whose evolution over time is assumed to be described by a discrete-time,…

We consider a heterogeneous agent-based economic model where economic agents have strictly bounded rationality and where income allocation strategies evolve through selective imitation. Income is calculated by a Cobb-Douglas type production…